U.S. stocks have surged this summer to levels not seen in years thanks to very low borrowing costs. Yet record valuations, a revival in speculative “meme” trading and a key “euphoria” indicator sitting at bubble‑like levels have many investors uneasy. This month, the S&P 500 reached new all‑time peaks, and U.S. firms are enjoying borrowing rates close to multi‑decade lows. FT reports this turnaround contrasts sharply with the sharp sell‑off in April triggered by President Donald Trump’s threats of escalating trade tariffs. Although Trump moves ahead with import duties at levels not witnessed for a generation, signs of overheating are accumulating. Major technology firms have soared to fresh heights. Nvidia was the first to hit a $4 trillion valuation while a resurgence of last year’s meme‑stock frenzy sees retail traders piling into GoPro and Krispy Kreme expecting rapid returns. “I think you’re beginning to see perhaps some very early parallels to what you saw back with the internet boom in the late 1990s and early 2000s,” said Dan Ivascyn, chief investment officer at $2.1 trillion asset manager Pimco. “There’s this lottery‑ticket mentality that tends to exist … It’s a dangerous set up.” Markets are settling for less as bad deals beat full-blown trade war According to Bloomberg, the S&P 500 is trading at over 3.3 times annual revenues, marking an unprecedented valuation. Barclays’ so‑called “equity euphoria” index, a composite of derivatives activity, volatility and sentiment, has climbed to twice its typical level, a threshold often associated with bubble conditions. U.S stocks reach record highs. Source LSEG, markets.ft.com “The indicator is clearly showing that the market is euphoric,” said Stefano Pascale, head of U.S. equity derivatives strategy at Barclays. Market participants greeted the U.S.‑Japan trade deal , which sets Japanese import levies at 15% and are now anticipating a similar arrangement with the EU. While these tariffs exceed pre‑Trump levels, they are milder than the dramatic rates warned in his “liberation day” address that had previously jolted equities. “These first deals are bad, but investors are happy with anything but a full trade war,” said Luca Paolini, chief strategist at Pictet Asset Management. Equities have largely ignored worries over ballooning U.S. public debt and potential threats to Federal Reserve independence , factors that have unsettled Treasury yields. The dollar has declined almost 10 percent this year versus a basket of currencies. The rally since April has been propelled by a select group of big tech names. Nvidia’s shares have rebounded by 100%, while Meta has recovered about 49 % from their April intraday depths. Debt surge sparks warnings of dot‑com era Valuation metrics such as price‑to‑sales, price‑to‑cash‑flow, price‑to‑book and price‑to‑dividend ratios across the index are approaching historic peaks. Rob Arnott, founder and chair of Research Affiliates, compared investing in these names to “picking up pennies in front of a steamroller.” He warned that the market is valuing leading AI companies as if competition won’t emerge, yet shifting away from these fashionable stocks too soon can be perilous. Even smaller outfits have outperformed the giants. Palantir’s stock , buoyed by substantial government deals, is up about 130% since April, and Coinbase has soared nearly 180% amid renewed enthusiasm for cryptocurrencies since Trump’s win last November. Bitcoin jumped above $120,000 last week as both corporations and investors increasingly embraced cryptocurrencies moving into mainstream finance. This optimistic sentiment has spread to the corporate bond market. The spread on top‑tier corporate debt over U.S. Treasuries has tightened to only 0.8 percentage points, levels not recorded since 2005. In a Thursday note, Deutsche Bank analysts questioned if this debt‑fueled equity buying represented the “ hottest euphoria ” since the late 1990s and mid‑2000s. Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot
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